Modvat credit on capital goods outside the factory was denied after the weighing bridge shifted to commercial use.

Modvat credit on a weighing bridge became inadmissible once the factory boundary was altered under the Compounded Levy Scheme and the equipment stood outside the factory premises. Because the capital goods were then used for commercial purposes rather than within the factory, Rule 57S of the Central Excise Rules, 1944 applied, and credit could not be retained. The Tribunal distinguished the authorities cited by the assessee as fact-specific and not applicable to capital goods located outside the factory.

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Issues: Whether Modvat credit on a weighing bridge installed outside the factory premises remained admissible after the factory boundary was altered and the weighing bridge came to be used for commercial purposes.

Analysis: The weighing bridge was initially installed within the factory and credit was taken on the duty paid thereon. After the assessee came under the Compounded Levy Scheme under Section 3A of the Central Excise Act, the boundary of the factory was changed and the weighing bridge fell outside the factory premises. Once the capital goods were no longer within the factory and were used for commercial purposes, the case attracted Rule 57S of the Central Excise Rules, 1944. The Tribunal held that the decisions relied on by the lower appellate authority were distinguishable on facts and did not govern a case where the capital goods stood outside the factory premises.

Conclusion: Modvat credit was not admissible and the Revenue's appeal was allowed.

Ratio Decidendi: Modvat credit on capital goods is not available where the goods are outside the factory premises and are used for commercial purposes, attracting the consequence contemplated by Rule 57S of the Central Excise Rules, 1944.

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